Stockholm (HedgeNordic) – The number of Nordic hedge funds with a track record spanning 15 years has now surpassed 30, with AIM Diversified Strategies Fund being the latest addition. The fund, which invests in strategies managed by hedge fund industry heavyweights such as Citadel Advisors, Two Sigma Advisers and D.E. Shaw, has enjoyed stronger performance during the latter half of its journey.

“Reaching the 15-year milestone underscores our track record of delivering strong and consistent returns,” says Miikka Hautamäki, chief executive officer of the Helsinki-based AIM Capital. “Over this time, the core objective of our strategy has remained the same: to provide institutional investors with robust, idiosyncratic sources of return in a relatively liquid fund format, with limited factor exposure and low downside beta to equity and credit markets,” he adds. “Our focus has been on maintaining resilience to navigate market volatility, all while adapting effectively to evolving conditions.”

A Stronger Second Half of its Journey

Despite operating as a fund of funds with seemingly limited flexibility in adapting to market shifts, AIM Diversified Strategies Fund has managed to improve its performance over time. The fund has achieved an annualized return of around six percent over the past seven and a half years, compared to just under four percent in the first half of its journey, translating to a lifetime annualized return of roughly 5.0 percent since its launch in September 2009. The past three years have been particularly impressive, with an annualized return of 9.7 percent after all fees.

“We’ve delivered strong performance over the past three years,” confirms Hautamäki, attributing the success to two main factors. “First, over the last five years, our conviction in our distinctive approach has been amplified by insights gained from various market cycles,” explains the CEO, who took the helm at AIM Capital in January 2019. “Unlike many competitors who pursue broad diversification across managers, strategies, and geographies, we have remained more U.S.-centric, focusing on top-tier multi-strategy funds and identifying unique idiosyncratic opportunities,” he continues. “This targeted approach has been a primary driver of alpha, allowing us to consistently outperform our regional peers.”

“Unlike many competitors who pursue broad diversification across managers, strategies, and geographies, we have remained more U.S.-centric, focusing on top-tier multi-strategy funds and identifying unique idiosyncratic opportunities.”

The second key factor, according to Hautamäki, is the evolving macroeconomic environment. “Up until 2020, financial markets were dominated by deflationary concerns, unprecedented central bank interventions, and prolonged monetary easing,” he explains. “These conditions compressed spreads across the industry, leading to lower hedge fund alpha overall,” argues Hautamäki. That environment partly explains AIM Diversified Strategies Fund’s somewhat lower returns in its earlier years compared to the last five years, largely due to the fund’s zero-beta approach.

A more inflationary environment in the post-pandemic era, further complicated by geopolitical challenges, has reshaped market dynamics. Anticipating that the shift away from a zero-interest-rate environment would challenge many strategies, Hautamäki says their underlying managers were well-positioned for this transition.“These experiences have offered valuable lessons, which continue to shape and refine our strategy, ensuring it remains adaptable and resilient in an evolving market environment,” he adds.

Outlook for Hedge Funds

AIM Diversified Strategies Fund has been one of the best-performing multi-manager funds in the Nordic region in recent years, winning the title of Best Nordic Fund of Hedge Funds for two consecutive years, after securing second place for three years in a row. As a seasoned hedge fund investor, Hautamäki and his team believe hedge funds will play an increasingly important role in investor portfolios.

“A growing number of institutional investors are raising their allocations to hedge funds, particularly as interest rates have again fallen to notably lower levels,” observes Hautamäki. “Moreover, we are seeing heightened interest in hedge funds from family offices, which have traditionally allocated less to this asset class in Scandinavia.” Hedge funds have long been a core allocation for U.S. family offices, notes Hautamäki.

“Hedge funds are well-positioned to navigate these evolving market conditions, offer a compelling risk-return profile, and strike a balance between passive investments, such as ETFs, and more illiquid alternatives like private equity or private credit funds.”

Hautamäki highlights that “investors are re-evaluating their portfolios in response to heightened macroeconomic uncertainty, driven by central bank rate cuts, moderating inflation, and growing recession risks.” He believes that hedge funds, including AIM Diversified Strategies Fund, “are well-positioned to navigate these evolving market conditions, offer a compelling risk-return profile, and strike a balance between passive investments, such as ETFs, and more illiquid alternatives like private equity or private credit funds.” However, this success depends on careful manager selection and the ability to access the best managers in the industry.